Tax season is upon us once again. One great benefit of going solar is the 30% Federal Tax Credit. Remember, homeowners can take advantage of the 30% Federal Tax Credit. So if you haven't already, don't forget to claim your tax credit.
The Federal government grants a credit to your income taxes proportional to the cost of your solar array:
2016 – 2019: The tax credit remains at 30 percent of the cost of the system. This means that in 2018, you can still get a major discounted price for your solar panel system.
2020: Owners of new residential and commercial solar can deduct 26 percent of the cost of the system from their taxes.
2021: Owners of new residential and commercial solar can deduct 22 percent of the cost of the system from their taxes.
2022 onwards: Owners of new commercial solar energy systems can deduct 10 percent of the cost of the system from their taxes. There is no federal credit for residential solar energy systems.
This credit is considered a non-refundable credit, which means the most you can recover in a given year is equal to the amount of income tax owed. The Solar Tax credit does have an unusual and important beneficial feature - it rolls over year over year (so if you aren’t able to take full advantage of it in the first year, you can get value in future years).
Installed and producing new arrays on your principal residence. Expansions of existing systems doing the same, batteries powered by solar power (batteries powered both by solar and other sources will partially apply). Take a look here for detailed information.
How do I apply?
This depends on how you pay your taxes. Common tax software like TurboTax each have a question asking if you installed solar on your home this year. If you proceed through the prompts and provide the full cost of your system (the amount you pay AFTER any sort of special or deal) it will properly apply the responsible tax credit.
If you have an accountant or do your own taxes without software, you’ll need to get a copy of Form 5695. There’s also an instruction form for filling that out. The information is similar to what’s described above - input the cost of the system after any sort of rebate or extra cost.
If you have a complex tax situation, retired or are in the process of retiring, we strongly recommend you consult a tax professional.